The Five Most Important Things to Know About MGIC’s New Restricted Market Policies – Part 1
by Tom on June 2, 2008
in Uncategorized
The Five Most Important Things to Know About MGIC’s New Restricted Market Policies – Part 1
Okay, first question as we embark on an effort to communicate the changes that are going through the mortgage industry, who is MGIC? They are one of the largest mortgage insurance companies in the country and without them, many of the loans with less 20% down wouldn’t get made.
So, what’s a restricted market?
Essentially, a restricted market is one where MGIC has put different rules in play than they have for other areas of the country. Yes, it’s not a level playing field any more. The rules aren’t the same for everywhere.
How is it determined what a restricted market is? (4 ways)
1. MGIC says it is – see the end of this post for a list of where they have declared restricted markets.
2. Where the appraiser says the property values is declining (there’s a box on the appraisal where they have to check that property values are declining, stable or increasing).
3. Where either LP (Freddie Mac’s automated underwriting system) or DU (Fannie Mae’s automated underwriting system) identifies the property as in a declining market.
4. Where the lender identifies the area as a declining market (for instance, Bank of America could say, “All of Las Vegas is a declining market.”
What does that mean? Essentially two things:
1. There’s a higher risk to the loans in restricted markets because the property values are seen as potentially declining.
2. Therefore the rules and guidelines are tighter (and more expensive). More on that later.
Click here for a link to MGIC’s list of restricted markets. I’ll give you a hint, Michigan, Arizona, Nevada, Florida and California are on there – the whole state!
